At what amount of earnings do you stop deducting FUTA from an employee's wages in one year?

The correct amount at which you stop deducting Federal Unemployment Tax Act (FUTA) taxes from an employee's wages in one year is $7,000.00. This means that once an employee's wages reach $7,000 in a calendar year, FUTA tax deductions no longer apply to earnings above this threshold.

Understanding the FUTA tax structure is essential for employers since it helps fund unemployment compensation programs. The tax is deposited quarterly, and this cap ensures that employers do not continue to pay unemployment taxes on high wages. Knowing this limit assists in accurately managing payroll, ensuring compliance with federal tax laws, and preventing overpayment or errors in tax calculations.

The other amounts listed, such as $5,000, $6,000, and $8,000, do not reflect the currently established limit for FUTA withholding and may lead to confusion regarding payroll tax responsibilities. Specifically, $5,000 and $6,000 are outdated figures that were applicable in previous tax years, while $8,000 exceeds the current cap, thus indicating improper withholding practices if applied.